Taking a position on turmeric in the futures market is not recommended at the present juncture. The futures contract of turmeric is currently trading well below its daily average over the last five-years of Rs 7,303 a quintal at Rs 4,694 a quintal on the National Commodity and Derivatives Exchange (NCDEX).

This is even lower than the monthly average spot price of Rs 8,500/quintal for the Erode grade and Rs 9,750/quintal for the Salem variety in Chennai during the week ended September 21, according to Spices Board India data.

Euphoria busts

It was thought that turmeric futures had bottomed out in 2012 and the only way was up in the medium-term. After hitting a low of Rs 3,374 a quintal on June 5, 2012, turmeric futures smartly recovered to Rs 7,024/quintal on April 15, provoking whispers of price-rigging. It turned out that the euphoria could not be sustained and the commodity has lost 33.1 per cent since then.

Given the discrepancy in futures prices vis-à-vis the average domestic prices — besides concerns raised by the market regulator over possible price manipulation in 2012 — investors would be better off adopting a wait-and-watch strategy for the time being.

Even international prices of turmeric are ruling higher than in India, the world’s largest producer of the spice.

Despite projections of lower output, turmeric has not fared well this year. One reason for this is poor domestic and export demand, which has already caused spot prices of the Cochin variety to crash 23.8 per cent, while Rajapuri Finger turmeric has lost 10.4 per cent, according to Spices Board India data.

This sharp decline in turmeric prices had prompted a number of farmers to opt for cultivation of alternative crops that offer better remuneration.

Besides this, rainfall in key growing States is reported to have damaged crops. According to an estimate floated by Geojit Comtrade, India’s total output of turmeric will be 50-60 per cent lower in 2013 than 2012’s historic high of 90 lakh bags (of 70 kg each).

Though the supply situation is expected to tighten, prices remain depressed. Turmeric futures had hit a high of Rs 15,934 a quintal on July 20, 2010, but began to oscillate wildly thereafter. By the start of 2011, turmeric prices had tanked to Rs 10,276 and by the end of the year, it had lost over half of its value, at Rs 4,796.

The slide continued till June 2012, when turmeric was quoted at Rs 3,374/quintal. It has since hovered between this three-year low and Rs 7,100 a quintal on the NCDEX. But in the New York market, turmeric is being quoted for at least Rs 13,986 a quintal, according to the Spices Board India.

Many farmers are even withholding their produce in the hope of garnering a better rate from the market, but to little avail. According to market reports, turmeric traders have received only one-fourth of the regular orders they normally receive from North India this year, which can be largely attributed to buyers’ recalcitrance to give in to farmers’ demands for a higher price.

Plea for probe

Recently, the Turmeric Farmers Association had petitioned the Prime Minister to order a probe by the CBI into alleged malpractices in turmeric futures trade on the NCDEX.

The association has alleged that NCDEX has been facilitating trade in the commodity without stock, among other charges.

Pertinently, the Forward Markets Commission had in September 2012 asked the NCDEX to investigate the possibility of “erratic” trade in turmeric, given that a single client and one member had been taking the largest position in this commodity for several months. It had sought a report on the issue from the bourse in three days, but no further developments appear to have taken place.

>arvind.jayaram@thehindu.co.in

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